First US Bancshares (NASDAQ:FUSB) Could Be A Buy For Its Upcoming Dividend

First US Bancshares, Inc. (NASDAQ:FUSB) is about to trade ex-dividend in the next 4 days. If you purchase the stock on or after the 11th of March, you won't be eligible to receive this dividend, when it is paid on the 1st of April.

First US Bancshares's next dividend payment will be US$0.03 per share. Last year, in total, the company distributed US$0.12 to shareholders. Calculating the last year's worth of payments shows that First US Bancshares has a trailing yield of 1.4% on the current share price of $8.79. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

See our latest analysis for First US Bancshares

Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. First US Bancshares paid out a comfortable 28% of its profit last year.

Companies that pay out less in dividends than they earn in profits generally have more sustainable dividends. The lower the payout ratio, the more wiggle room the business has before it could be forced to cut the dividend.

Click here to see how much of its profit First US Bancshares paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Companies that aren't growing their earnings can still be valuable, but it is even more important to assess the sustainability of the dividend if it looks like the company will struggle to grow. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. It's not encouraging to see that First US Bancshares's earnings are effectively flat over the past five years. Better than seeing them fall off a cliff, for sure, but the best dividend stocks grow their earnings meaningfully over the long run.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. First US Bancshares's dividend payments per share have declined at 12% per year on average over the past 10 years, which is uninspiring.

To Sum It Up

Is First US Bancshares an attractive dividend stock, or better left on the shelf? First US Bancshares has seen its earnings per share stagnate in recent years, although the company reinvests more than half of its profits in the business, which could bode well for its future prospects. In summary, First US Bancshares appears to have some promise as a dividend stock, and we'd suggest taking a closer look at it.

While it's tempting to invest in First US Bancshares for the dividends alone, you should always be mindful of the risks involved. For example - First US Bancshares has 3 warning signs we think you should be aware of.

We wouldn't recommend just buying the first dividend stock you see, though. Here's a list of interesting dividend stocks with a greater than 2% yield and an upcoming dividend.

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This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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